D8=0

Question 3 [Total 15 marks] ABC Utilities is planning to install solar panels to provide some of the electricity for its groundwater desalting plant. The project would be done in two phases. The first phase will cost $ (2,000,000 +D81,000) at EOY 1 and $ (1,500,000 +D8x1,000) at EOY 2. This investment will result in energy savings (phase 2) of $(750,000 + D8x1,000) at EOY 3, $(759,000 + D81,000) at EOY 4, and amounts increasing by $9,000 each year through EOY 10. Assume MARR (minimum acceptable rate of return) is (3 + D8)% per year. (a) What is the future worth of the energy savings? Round off your final answer to nearest thousand. (b) Using FW method, is the cost of the solar project justified by the energy savings? Why? (c) What is the PW (net present value) of this solar panel project? Round off your final answer to nearest thousand. Question 3 [Total 15 marks] ABC Utilities is planning to install solar panels to provide some of the electricity for its groundwater desalting plant. The project would be done in two phases. The first phase will cost $ (2,000,000 +D81,000) at EOY 1 and $ (1,500,000 +D8x1,000) at EOY 2. This investment will result in energy savings (phase 2) of $(750,000 + D8x1,000) at EOY 3, $(759,000 + D81,000) at EOY 4, and amounts increasing by $9,000 each year through EOY 10. Assume MARR (minimum acceptable rate of return) is (3 + D8)% per year. (a) What is the future worth of the energy savings? Round off your final answer to nearest thousand. (b) Using FW method, is the cost of the solar project justified by the energy savings? Why? (c) What is the PW (net present value) of this solar panel project? Round off your final answer to nearest thousand